Gloomy Chicago biz owners now less likely to hire: survey

(Crain's) — Chicago business owners are gloomier about the economy than they were earlier in the year and feel worse about their prospects than their counterparts do nationally on average, according to a new survey.

Most important, from the vantage point of the region's higher-than-average unemployment rate, a lower percentage of businesses plan to add staff in the next six months than was the case six months ago.

That's according to a survey of 1,200 owners of small or mid-sized businesses, including 153 in the Chicago area, commissioned by Pittsburgh-based PNC Financial Services Group Inc., the nation's sixth-largest bank by deposits and the fourth-largest in the Chicago area.

The survey was conducted from July 29 to Aug. 25.

Of the Chicago businesses queried, 13% said they planned to hire more in the next six months, down from 21% from PNC's previous survey, conducted in February. Nationally, by contrast, 22% of businesses planned to increase hiring.

“We definitely see a downshift in Chicago to a lower level than the U.S.,” said Robert Dye, senior economist for PNC.

Higher unemployment in the area probably explains the more pessimistic view in Chicago, he said.

In addition, other parts of the Midwest, like Ohio, where businesses seem relatively more optimistic about the future, are more dependent on the automobile industry, which had a more pronounced recovery than other industries, he said.

He also said Illinois' severe budget problems and political travails are likely contributing to business pessimism. New Jersey, another state with a deep budget hole, also has similar business-sentiment issues.

Other results of note from the survey: 72% of Chicago businesses were pessimistic as to whether the national economy would recover soon, vs. 58% for the national sample, and 61% of the Chicago group was pessimistic about the local economy vs. 42% in the national sample.

One brighter spot for local workers is that 29% of the Chicago businesses polled expect employee compensation to rise in the next six months compared with 21% at the same point last year.

Mr. Dye said he expected Chicago sentiment would improve on a relative basis. More recent economic data have been more positive than the numbers that were coming out in August.

“I do think there is a timing issue here as to when the survey was in the field,” he said.

Significantly, the size of the Chicago sample gives it a higher statistical margin of error than the overall survey. The national survey carried with it a margin of error of plus or minus 4.3% while the Chicago sample's margin of error is more than 8%.